Community Based Savings

Community-based saving is a microfinance model that is considered to be an effective method for financing projects in sustainable sanitation and water management. Community-based saving is currently introduced in many developing countries to help particularly poor rural communities to save money by organising so-called community-based saving groups.

The basic objective of a community saving group is to encourage and create a saving culture in the community. Thereby, economic security is increased and financial services are brought closer to communities for promoting secure investment with savings (LUPP n.y.). The group can further decide to focus on savings or to also engage in giving loans to its members. In most cases, the group also engages in giving loans. Therefore, joining the saving group offers a unique opportunity for the household. It enables investments in water and sanitation services to ensure better healthcare (see water sanitation and health) for the whole family.

(Adapted from LUPP n.y.)

Community-based saving groups are either implemented by the group itself or with the support of local NGOs. The implementation of a community-based savings group consists of four phases. If the community members build up the group on their own, the first two steps are enough to consider. However, if there is support from an NGO, all four steps are important to follow through. The 4 phases are the following:

1. Introduction Phase:

The objective of the first step is to identify the participants or the members and facilitate the information of groups who become familiar with the basic characteristics of the community saving methodology and register within the group.

2. Intensive Phase:

In the second phase, the aim is to train and organise the group. In this phase the group establishes a management committee, sets up internal rules, and defines the objectives of the group.

• Establishing management committee: election of a leader, accountant, treasurer and assistant to the accountant.
• Setting up internal rules: How often a month does the group meet? Is the participation of members a must? What if somebody does not attend a meeting? What is the maximum fixed amount of money that can be invested? Where should money be kept to ensure safety? etc.
• Defining the objectives of the group: Does the group engage only in savings or also give small loans to members? If the group can engage in giving small loans, should an interest rate be charged for the loan? And if yes, how much should the interest rate be? What is the maximum loan period? etc.

After the group has appointed persons in charge of managing finances and the group, after it has set the objectives, developed rules and agreed on all conditions, the savings process can begin.

3. Development Phase:

The aim of the third phase is to help the group become autonomous. The support organisation should only intervene if the group needs any help or consultation.

4. Maturity Phase:

This phase is important to help the group to become independent of the project. In this phase, evaluation is conducted and based on evaluation it is decided whether the group can work independently or needs further assistance.

After the savings period ends, the members of the community saving groups can use the opportunity to invest in improving their water and sanitation conditions.

• For ensuring safety and to avoid trouble, the group must give thought to where the money should be saved. The money can either be kept in a cash box with a responsible person or deposited in the nearest bank.
• Assigning responsible people (with basic accounting skills) for managing the account is crucial.
• Members should all have membership books where investments are recorded to avoid any disputes.